Toyota Plans Engine and Transmission Manufacturing Facility in India

Automotive major Toyota Motor Corporation (Toyota City, Japan) recently announced that it is considering the construction of an engine and transmission production plant in India so the company can use locally manufactured vehicle parts rather than imported ones. Industrial Info Resources (Sugar Land, TX) reports that such a step would make the company's products more competitive.

Toyota runs its Indian operations through Toyota Kirloskar Motor Private Limited (TKM) (Bangalore, Karnataka), which is the 89:11 joint venture company that Toyota has formed with the Kirloskar Group (Pune, Maharashtra, India). According to Hiroshi Nakagawa, managing director of TKM, the company hopes to increase the localization levels from the existing 50 percent. He added that depending on local demands, the company would decide whether it would manufacture diesel or petrol engines, or both.

TKM currently imports both types of engines for its luxury sedan Corolla and multi-purpose vehicle Innova from its facilities in Japan and Thailand. If finalized, the company will set up the new facility at its upcoming second factory at Bidadi, on the outskirts of Bangalore in Karnataka. The complex at Bidadi is spread over a land area of 430 acres.

The venture is preparing to launch a small car in the Indian automotive market by 2011, and the second facility at Bidadi is being developed for that purpose. The second facility will have an initial production capacity of 70,000 units per year and is being set up with an investment of about $690 million. The capacity of the facility may be increased to 200,000 units if demand requires expansion. The facility is expected to be ready by 2010. The existing facility of TKM has a production capacity of 80,000 units per year. The company reportedly will invest about $172 million in the first facility during 2011-16.

TKM's small car is codenamed 800L and the company expects the model to play a significant role in the Indian automotive market in spite of the stiff competition it will have to face from Hyundai Motor Company (Seoul, South Korea), Maruti Suzuki India Limited (New Delhi, India), and Tata Motors Limited (Mumbai, India), which are companies that are already established in the small-car sector. Nearly 70 percent of India's car business is accounted for by the small-car segment.

Automotive majors Volkswagen AG (Wolfsburg, Germany), Honda Motor Company Limited (Tokyo, Japan), General Motors Company (Detroit, MI), and Ford Motor Company (Dearborn, MI) are all planning to launch small cars in India. Ford has announced that it plans to introduce a new small car in India every 12 to 15 months over the five years following the launch of the Ford Figo in 2010. The company intends to set up a global manufacturing hub for small cars in India and ensure its place in the small-car segment that Ford predicts will constitute 60 percent of all car sales worldwide during the next 10 years. In September 2009, Ford signed a memorandum of understanding with the state government of Tamil Nadu, whereby Ford will double the capacity of its production unit near Chennai and set up a new integrated engine plant.

Maruti, India's largest car manufacturing company, has announced plans to increase its production capacity by 200,000 units during the next two financial years. It has finalized plans to invest almost $2 billion on a research and development center and a new engine plant. Thus, Toyota will be facing tough competition as it sets about implementing its plans in India.